Standard Chartered Most at Risk From Commodities, Bernstein Says

  • Credit Agricole most exposed to Glencore credit lines: analyst
  • Commodity lending risk `widely spread' among global banks

Standard Chartered Plc has the greatest exposure to commodity traders among European banks, according to an analysis by Sanford C. Bernstein, with $1.9 billion of syndicated loans as concern spreads about the industry’s debt load and prices plunge.

Analysts led by Chirantan Barua estimate Standard Chartered has more than $1 billion of loans and credit lines to oil trader Trafigura Pte Ltd., whereas Credit Agricole AG has the largest exposure of any bank, $841 million, to Glencore Plc, which has seen its stock plummet 63 percent this year. Societe Generale SA has made $1.8 billion of loans to natural-resource traders, the second-most in Europe, Bernstein estimates.

Bernstein said it used the level of syndicated loans to the companies, which is publicly known, to estimate total debt including undisclosed bank loans, based on historical trends.

Loans to the industry have come under scrutiny as the price of oil, copper and other commodities falls amid weakening demand from China. Glencore, the Swiss producer and trader of commodities, aimed to reassure investors concerned by its borrowing, saying last week that its solvency isn’t at risk and announcing a $10 billion debt-reduction plan earlier this month.

“Turbulence in commodities has resulted in the bonds of a number of key commodity players trading toward junk levels, so naturally investors are spooked about the banks’ exposures,” Barua said. Although “volatility is not about to abate,” the “risks are actually much more widely spread across the global banking sector in case we get to an unlikely default.”

The seven-largest commodity traders included in the analysis -- Glencore, Trafigura, Noble Group Ltd., Olam International Ltd., Bunge Ltd., Archer-Daniels-Midland Co. and Wilmar International Ltd. -- have about $125 billion of debt, with $50 billion in bonds and the remainder syndicated loans, according to Bernstein.

HSBC Holdings Plc has about $1.3 billion of loans to commodity traders, including $658 million to Glencore, and Royal Bank of Scotland Group Plc, Barclays Plc and Credit Agricole all have about $1 billion each exposed to the firms, according to the report.

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